Argentina closed the year 2023 with year-on-year inflation of 211.4%, the highest figure since the period of hyperinflation in 1989-1990. This figure emerges from the first measurement carried out during the government of Javier Milei, who began his term with a ‘shock’ plan that included a 50% devaluation of the peso.

The National Institute of Statistics and Censuses (Indec) reported that, in December, the consumer price index rose by 25.5% compared to November, marking a significant acceleration compared to the previous month. This increase is linked to the ‘sincerization’ of prices following the Alberto Fernández administration, where Sergio Massa, Minister of Economy and opponent of Milei in the elections, implemented a policy of ‘fair prices’.

Following the announcement of the first economic measures of the Milei government in December, the Central Bank said that price liberalization was essential to correct fiscal and external imbalances. In December, increases were noted in several sectors, with goods and services rising by 32.7%, health by 32.6%, and transportation by 31.7%.

The food and non-alcoholic beverages sector saw an increase of 29.7%, with essential products such as wheat flour, rice and sunflower oil rising by more than 50%. This situation raises concerns about its impact on the basic basket and the poverty rate, which in Argentina is around 45%.

President Milei, who took office on December 10, anticipated monthly inflation rates of between 20% and 40% between that month and February. However, he assured that his fiscal ‘shock’ plan would avoid an annual hyperinflation of 15,000%. Milei also stressed in an interview that a monthly figure close to 25% would be a significant success.

The president aims to achieve fiscal balance by 2024, putting an end to the monetary issue that has so far been used to finance the deficit. In addition, Milei acknowledged the possibility of closing the Central Bank in the future, as part of its strategy to control inflation over a period of 18 to 24 months.

K. Tovar

Source: Bancaynegocios

(Reference image source: rc.xyz NFT gallery, Unsplash)

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The third monetary reconversion is imminent, but that strategy will not make citizens prefer the bolivar. This was stated by the economist and former deputy José Guerra, who also indicated the need to create a new currency.

According to the expert, the new currency should be anchored to the dollar, while the economy recovers and subsequently it is necessary to progress to “a floating system on solid fundamentals.”

As a consequence of the damage caused by the economic policies, especially between 2007 and 2020, the former deputy considers that it is impossible to restore the bolivar. He affirmed that, in financially unstable countries, the issuance of local currency must be supported by international reserves so that the public chooses to maintain it and that does not happen in Venezuela.

According to the economist, it is imperative to defeat hyperinflation. This requires the design and application of an extensive program of economic and institutional reforms with external financing, in order to prevent the Central Bank of Venezuela (BCV) from continuing to increase the fiscal deficit.

“The most expeditious recipe for destroying a currency is for the central bank to use its issuing capacity to finance the treasury, a populism tool known as the inorganic issuance of money and it is the strategy most used by all countries that have suffered from hyperinflation”, Guerra concluded.

M. Rodríguez

With information from national media

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